Addressing threats to health care's core values, especially those stemming from concentration and abuse of power. Advocating for accountability, integrity, transparency, honesty and ethics in leadership and governance of health care.

Sunday, October 27, 2013

There They Go Again - Omnicare to Settle for $120 Million

Omnicare, Inc, a
leading U.S. provider of pharmacy services to the elderly, has agreed
to pay the U.S. government $120 million to settle allegations the
company gave nursing homes steep discounts on prescription drugs in
exchange for patient referrals.

Cincinnati-based
Omnicare announced the settlement on Wednesday in a filing with the U.S.
Securities and Exchange Commission, but denied any wrongdoing. The
lawsuit, filed in 2010 by former Omnicare employee Donald Gale, had been
scheduled to go to trial on October 28.

Gale
accused the company of engaging in a kickback scheme called 'swapping'
in which Omnicare allegedly gave nursing homes heavily discounted
prescription drugs for inpatients covered by Medicare Part A. That
federal benefit program pays skilled nursing facilities a fixed fee per
patient, per day, for the first 100 days of a patient's stay, according
to court filings.

In exchange, the nursing homes allegedly referred their
other patients, many covered by other federal benefit programs, allowing
Omnicare to bill the full price of their prescription drugs and
pharmacy services, the lawsuit said.

As is usually the case,

Omnicare's vice president of investor
relations, Patrick Lee, said in an emailed statement that the company
did not admit liability in settling the lawsuit.

'The
Company agreed to settle the matter in order to avoid continued
litigation and to focus on its mission of helping to ensure the health
of seniors and other patient populations in a cost-effective manner,' he
said.

He did not comment on the discrepancy between the alleged kickback scheme apparently meant to increase company revenue and that bit about ensuring health in "a cost-effective manner."

Will There be Still Others?

In addition, the Cincinnati Business Courier quoted another Omnicare executive,

'This settlement is not an admission of liability, and Omnicare continues to deny that there was any wrongdoing,' Robert Kraft,
chief financial officer for Omnicare, said Wednesday in a conference
call with market analysts regarding the company’s third-quarter
earnings. 'When we agree to settle these types of matters, we have and
will continue to make decisions in the best interest of our
shareholders. …'

'We operate in a highly regulated industry, and we believe additional
matters will likely arise against the company in the future,' Kraft
said. 'We believe the matters of which we are now aware, including the
aforementioned settlement, are manageable given the company's financial
position and cash-flow characteristics.'

Was that an admission that the company often violates regulations? It is hard to tell. However, it is clear that this is not the first settlement of allegations of bad behavior that the company has made.

In addition, as we discussed in 2010, in 2009, we discussed
a $98 million settlement made by Omnicare, US based corporation that
manages pharmacy-benefits, of allegations that it received kickbacks
from generic drug manufacturers for buying and recommending their
drugs. Omnicare had previously submitted to a corporate integrity
agreement in 2006, and paid $102 million to settle allegations it
defrauded Medicaid.

So the count so far is four settlements for a total of approximately $337 million, and one corporate integrity agreement.

Summary

So Omnicare is yet another of the many large health care organizations which have been subject to various legal actions suggesting diverse kinds of bad behavior. Omnicare, like many of these, has paid penalty upon penalty, yet each settlement seems to be made in a vacuum without reference to prior events. Furthermore, almost no settlement, and no settlement made by Omnicare, ever either imposed a large enough penalty on the company to deter further problems, or imposed any - I repeat any - negative consequences on anyone at the company who authorized, directed, or implemented the bad behavior. So, as obliquely stated by the Omnicare CFO in this case, expect further "matters" to be addressed in the future.

the usual sorts of legal settlements we
have described do not seem to be an effective way to deter future
unethical behavior by health care organizations. Even large fines can be
regarded just as a cost of doing business. Furthermore, the fine's
impact may be diffused over the whole company, and ultimately comes out
of the pockets of stockholders, employees, and customers alike. It
provides no negative incentives for those who authorized, directed, or
implemented the behavior in question. My refrain has been: we will not
deter unethical behavior by health care organizations until the people
who authorize, direct or implement bad behavior fear some meaningfully
negative consequences. Real health care reform needs to make health care
leaders accountable, and especially accountable for the bad behavior
that helped make them rich.

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